Catholic Health Initiatives broke some new ground in the not-for-profit healthcare world last month by doing what investor-owned companies have done for years: making its annual financial results available on its Web site.
Generally hospitals have been reluctant to make their financial minutiae available to anyone with a Web browser. But the large Denver-based system decided the Internet could save time and money by expediting the dissemination of financial reports, as well as providing simultaneous access to all bondholders, says Linda MacDonald, CHI's director of capital finance.
CHI appears to be the first large not-for-profit healthcare system to post a financial report on the Web, according to industry sources.
A link to CHI's latest annual report is displayed prominently at the top of its home page (at www.catholichealthinit.org). CHI notified investors about the Web posting through an announcement via Bloomberg News on Sept. 25.
The move to Web communication with investors comes as a result of stiffer disclosure covenants CHI made in its most recent bond issue in March. For the first time, the 70-hospital system promised to issue quarterly financial statements. It also agreed to provide copies of those statements to any investor who requests one, MacDonald says.
Previously, CHI followed minimum disclosure rules set by the Securities and Exchange Commission, which require municipal issuers to file annual reports with data warehouses, known as nationally recognized municipal securities repositories. Investors have complained that retrieving reports from the SEC-designated repositories creates an additional delay and expense (Sept. 18, p. 52).
In addition to filing quarterly data with the repositories, CHI will be posting quarterly results on its Web site starting next month, MacDonald says.
If its experience proves successful, Web disclosure could be adopted by other not-for-profit hospital issuers. Lately some hospitals and systems have agreed to provide more frequent and detailed financial information to enhance demand for their bonds, according to bond lawyers. Both investor groups and the SEC have advocated Web disclosure as a cost-effective means of doing that.
One stumbling block has been the possibility that an issuer could be held legally liable for failing to update its Web site if there is a change in its financial condition. To get around that, CHI's site requires visitors to read a lengthy disclaimer before accessing the financial report. The disclaimer tells visitors not to assume that the information hasn't changed since it was posted, and that CHI has not "assumed any responsibility in any manner" to update the information.
So far the posting hasn't resulted in a flood of calls to CHI officials from curious reporters or the public, MacDonald says. As of last week, she could not say how many times the report had been called up online.
Initially, at least, the Web-published report appears to be fulfilling its goal of saving work for CHI staff. MacDonald says CHI will send paper copies of reports to investors upon request, but she doesn't think many of them will want to wait for the mail.
"My feedback is that most investors are delighted to get it off the Web and print it themselves," she says.